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3 Top Stocks to Buy for Your Kids

By Brian Feroldi, Matthew DiLallo, and Timothy Green – Nov 11, 2016 at 11:22AM

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Are you interested in giving your kids a financial head start in life? If so then buying them a few shares of these three companies might be a smart decision.

Are you interested in teaching your kids a valuable financial lesson that will last their lifetime? If the answer is yes, then we Fools think you should make them part owners of a company that they love. Doing so will teach them about the power of compound interest and may even help them cover a major expense down the road. 

With that in mind, we asked three of our Motley Fool contributors to highlight a stock they think that a kid would love to own. Read on to see why they picked Walt Disney (DIS -1.83%)Hasbro (HAS 0.82%), and Microsoft (MSFT 1.05%).

Image source: Getty Images.

Teach them the magic of investing

Matt DiLallo (Walt Disney)While I don't have any kids yet, if I did, the first stock I'd buy for them would be Walt Disney. First and foremost, Disney is a great company with an exceptional track record of delivering solid revenue, earnings, and dividend growth. Further, given its strong brand, financial discipline, and track record, I'd bank on Disney continuing to put up solid financial results for years to come.

That said, what makes Disney such a perfect stock for kids is that it's an excellent teaching tool. Parents, for example, can turn a trip to Disneyland into more than just a family vacation and use it to talk to their kids about owning a small piece of that vast Disney empire. Another idea is to show them all of the dividend payments that have piled up in their account, which is their share of the profits from all the toys and movies sold to other boys and girls. These are lessons that kids are more likely to grasp from a young age because Disney is a company they know and love. 

There's no guarantee Disney will be a magical investment and turn your kids into millionaires. However, the odds are pretty good that Disney will continue to do well as long as it makes products and content kids love. More importantly, parents can teach their children some magical investing lessons, which might turn out to be even more valuable than the money they make from owning Disney stock.

Help them earn some play money

Brian Feroldi (Hasbro): Kids love toys and games, so I think they'd be quite excited to learn they owned a few shares of Hasbro. This company owns a number of megahit brands like Nerf, Transformers, Play-Doh, My Little Pony, Magic, Monopoly, and more, all of which would make it fun for kids to follow along with how the company is performing. 

Image source: Hasbro.

Investors should warm up to Hasbro because its management team hit a home run when it edged out rival Mattel to with the contract for Disney princess and Disney Frozen products. That single move helped the company's girls segment grow by 48% last quarter, which helped pull overall revenue up by 14% and profits up by 24%. 

The company's boys segment also looks poised for growth. Hasbro holds the lucrative license for Star Wars products, which has five more films expected to be released between now and 2020. That should keep demand for products high for years to come.

Add it all up, and Hasbro should be able to grow its profits by double-digits over the long term. That makes this a stock investors and kids alike can learn to love. 

Minecraft, Xbox, and everything else

Tim Green (Microsoft): Microsoft is a complicated business with a lot of moving parts, but it owns two businesses, Xbox and Minecraft, that kids love. This, along with the potential for solid returns in the long run, makes Microsoft an ideal stock to buy for your children.

Microsoft is in the middle of an aggressive transition to the cloud. Its mainstay Office suite has been wildly popular as a subscription service, successfully fighting off encroachment from Alphabet's Google. Azure, Microsoft's cloud computing platform, is more than doubling revenue annually. And the company has embraced non-Windows platforms, creating first-class apps for Android, iOS, and the web. Windows remains important, but Microsoft has realized it needs put its software in front of as many users as possible, no matter the platform.

Microsoft has cranked up the innovation in recent years. HoloLens, Microsoft's augmented reality headset, has the potential to transform how people interact with computers. An augmented reality version of Minecraft is one of the more impressive applications to date, but the sky's the limit in terms of potential use cases. HoloLens isn't available commercially yet, and the first-generation version will likely be rough. But Microsoft may have a transformative technology on its hands.

Shares of Microsoft aren't cheap, trading for around 19 times free cash flow. But the company has been making all the right moves as of late. In the long run, your kids are unlikely to be upset about an investment in Microsoft.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Alphabet (A and C shares), Hasbro, and Walt Disney. Matt DiLallo owns shares of Walt Disney; he also has the following options: long January 2018 $80 calls on Walt Disney and short November 2016 $100 calls on Walt Disney. Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Hasbro, and Walt Disney. The Motley Fool owns shares of Microsoft.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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